UK Royal Mail on course for GBP400m profit target

Royal Mail will this week announce that it is on course to reach its profit target of GBP400m for the current financial year, having generated profits of about GBP200m in the six months ending September 30. Last year, Royal Mail made an operating profit of GBP220m, compared with a GBP197m loss in the 2002-03 financial year. The turnround has been achieved through cost-cutting, including 30,000 redundancies, as well as a rise in the price of stamps. If the GBP400m profit figure is reached for the 12 months ending March 31 2005, the state-owned company has promised to pay out GBP200m in bonuses to its employees.
If financial and service targets are met, Royal Mail’s senior management will also receive generous awards. Adam Crozier, the chief executive, Allan Leighton, the chairman, and Elmar Toime, the now-departed deputy chairman, all waived or deferred parts of their bonuses for the 2003-04 financial year after the organisation failed to meet all 15 of its quality of service targets.

Royal Mail is expected to unveil its first-half results towards the end of this week.

As well as a financial recovery, Mr Crozier is likely to argue that the reliability of postal deliveries has improved following widespread problems during the first part of the year. From April to June, 88.3 per cent of first-class mail was delivered the next day, falling short of the 92.5 per cent target set by the regulator Postcomm.

Royal Mail attributed the poor service to a restructuring of the delivery network and changes in working practices, including the abolition of the second daily delivery.

More than 92 per cent of first-class letters were delivered the next day between July and September, according to sources close to Royal Mail, just short of the target and the best performance for some time. The second-class mail target, that 98.5 per cent of post is delivered within three working days, was met.